Luxury is picking up digital pace in 2017
If 2016 taught the luxury sector anything, it’s that now is the time to go online. Digital sales vastly outperformed the rest of the luxury market last year, and companies in the space have taken note. According to The Wall Street Journal, citing ad-buying firm Zenith Media, the luxury industry has been lowering its spend on magazine advertising over the last 3 and half years. By 2016, it had fallen 8% to $2.6 billion. Over the same timeframe, the industry’s purchase of digital advertising space has skyrocketed by 63% to over $1 billion.
In China, digitization of the space is even more obvious. A number of mainstay companies in the luxury world, including LVMH and Richemont, are looking at sales through popular app WeChat. WeChat, owned by Chinese Ecommerce titan Tencent, is fast becoming a powerful force in online shopping, and luxury companies are eager to see whether the country’s returning taste for luxury products can be harnessed through it. With over 900 million users on the platform, it’s easy to see why.
Tencent’s president Martin Lau says that WeChat is “increasingly playing an important role in the commercial world”. But it’s not the only player in the Chinese Ecommerce space. Two other huge names – Alibaba and JD.com – are also embracing luxury companies like Pandora. Even Prada, which spent years as a digital laggard, is embracing the move: the company’s CEO, Patrizio Bertelli, went on the record in April claiming that he wanted to “convert our presence in social media into sales.” Platforms like WeChat, which blend social media and online retail, are the perfect opportunity to do so.
Renaud Litre, CEO of Cartier China, struck a more resigned note when he told reporters that “China is one of the most digitized markets in the world today, and Cartier has to adapt to it”. But the Chinese Ecommerce market is likely just a sign of things to come: the world is going digital; and now, so is luxury.
Dominion holds LVMH, Richemont, and a number of other companies involved in the trends discussed in this article, in its Global Trends Luxury Fund.
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